Pricing Zero-Coupon Catastrophe Bonds Using EVT with Doubly Stochastic Poisson Arrivals

<div>QQ-plot of PCS loss index quantiles against <svg height="14.9491pt" id="M225" style="vertical-align:-6.3132pt" version="1.1" viewbox="-0.0498162 -8.6359 21.0764 14.9491" width="21.0764pt" xmlns="http://www.w3.org/2000/svg" xmlns:xlink="http://www.w3.org/1999/xlink"><g transform="matrix(.013,0,0,-0.013,0,0)"><path d="M673 297H417L411 270C517 261 522 258 506 183L487 92C476 38 428 19 360 19C207 19 123 132 123 287C123 472 243 631 441 631C557 631 617 583 617 469L647 472C650 545 655 604 658 632C625 643 554 666 467 666C201 666 23 502 23 278C23 90 156 -16 339 -16C410 -16 501 6 569 24C566 43 567 70 573 101L589 183C604 259 607 262 667 271L673 297Z" id="g113-72"></path></g><g transform="matrix(.0091,0,0,-0.0091,9.096,1.76)"><path d="M490 563C409 598 330 631 258 673H233C161 631 81 597 0 563L14 533C89 551 168 576 245 598C320 575 400 551 476 533L490 563Z" id="g56-17"></path></g><g transform="matrix(.0091,0,0,-0.0091,8.827,4.51)"><path d="M435 683C435 695 433 700 417 700C380 700 311 676 267 649C217 655 198 677 198 698C198 713 202 725 205 731L185 739C156 728 122 706 122 679C122 646 165 618 221 611C170 578 115 533 115 461C115 416 145 377 177 365C103 329 24 261 24 163C24 72 81 34 155 14C181 7 201 3 222 -1C284 -14 298 -34 298 -59C298 -97 254 -151 235 -171L262 -194C285 -179 378 -110 378 -28C378 14 343 58 273 70C248 74 219 80 190 89C140 104 109 134 109 190C109 259 165 325 225 350C251 343 285 340 318 340C334 340 376 381 376 403C376 416 372 420 355 420C323 420 284 410 258 403C221 409 194 444 194 490C194 540 236 586 274 608C317 608 364 613 388 623C408 631 435 653 435 683Z" id="g50-236"></path></g><g transform="matrix(.0091,0,0,-0.0091,13.02,4.51)"><path d="M98 134C72 134 46 117 46 90C46 73 55 65 60 64C95 55 124 32 124 -4C124 -42 95 -68 44 -89L57 -123C122 -104 194 -60 194 22C194 94 136 134 98 134Z" id="g50-45"></path></g><g transform="matrix(.0091,0,0,-0.0091,15.98,4.208)"><path d="M490 563C409 598 330 631 258 673H233C161 631 81 597 0 563L14 533C89 551 168 576 245 598C320 575 400 551 476 533L490 563Z" id="g56-17"></path></g><g transform="matrix(.0091,0,0,-0.0091,15.176,4.51)"><path d="M558 454L532 470C512 451 497 442 465 442C421 442 376 450 318 450C146 450 24 313 24 164C24 46 91 -12 183 -12C317 -12 439 105 439 247C439 306 428 346 382 385L383 389C414 384 450 379 485 379C517 379 539 412 558 454ZM357 273C357 191 313 28 205 28C149 28 111 79 111 160C111 266 175 396 280 396C298 396 328 386 341 357C353 331 357 315 357 273Z" id="g50-240"></path></g></svg> quantiles.</div>

Discrete Dynamics in Nature and Society

fig11

Figure 11

Figure 11: Pricing Zero-Coupon Catastrophe Bonds Using EVT with Doubly Stochastic Poisson Arrivals 